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Solution For Repairs & Improvement & Finacial Cost

The document outlines a suggested solution for calculating repairs, improvements, and financial costs for a business. It details the adjustments made to profit and chargeable income, including allowable deductions and excess costs. Finally, it computes the tax payable based on the adjusted chargeable income and applicable rates.

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ahiabormakafui1986
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22 views2 pages

Solution For Repairs & Improvement & Finacial Cost

The document outlines a suggested solution for calculating repairs, improvements, and financial costs for a business. It details the adjustments made to profit and chargeable income, including allowable deductions and excess costs. Finally, it computes the tax payable based on the adjusted chargeable income and applicable rates.

Uploaded by

ahiabormakafui1986
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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SUGGESTED SOLUTION FOR REPAIRS AND IMPROVEMENT

GHS

Profit per account 100,000.00

Add back Repairs and improvement 6,000.00

Assessable Income 106,000.00

Less

Allowable Repair or improvement (5/100*60,000) =3,000 3,000.00

Adjusted profit 103,000.00

The excess repairs of GHS 3,000.00 (i.e. 6,000.00- 3,000.00) for which a deduction was not
allowed shall be added to the depreciation basis of the applicable pool for purposes of granting
capital allowance expenditure for the year.

SUGGESTED SOLUTION FOR FINANCIAL COST

a. Determine the chargeable income after adjusting for financial gain and financial cost

Profit before tax 22,000


Add back
Depreciation 7,000
General bad debt written off 1,500
30,500
Less:
Unrelieved loss 2,000
Adjusted profit 28,500
Less:
Capital allowance 12,000
Chargeable Income 16,500
Add Financial cost 50,000
66,500
Less Financial gain 7,000
Chargeable income after adjusting for financial gain and financial cost 59,500
b. Compute the allowable financial cost

Allowable Financial cost = Financial Gain + 50% of the Adjusted chargeable income

= 7,000 + {(50% × (59,500)}

= 7,000 + 29,750

= 36.750

NB: Excess Financial Cost = 50,000 - 36,750 = 13,250

The excess financial cost of 13,250 will be disallowed expense, however, this cost may be
carried forward for the next 5 years of assessment.

c. Compute the tax payable (first compute the new chargeable income before the tax payable)

Profit before tax 22,000


Add back
Depreciation 7,000
General bad debt written off 1,500
Financial Cost 50,000
80,500
Less:
Unrelieved loss 2,000
Allowable Financial cost 36,750
Adjusted profit 41,750
Less:
Capital allowance 12,000
Chargeable Income 29,750

Tax payable (25%×29,750) 7,437.50

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